Top broker gives its verdict on ANZ's Suncorp Bank acquisition

Here's what a top broker is saying about ANZ's big deal…

| More on:
Broker looking at the share price on her laptop with green and red points in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price remains out of action.

The banking giant's shares are currently in a trading halt until Thursday while it undertakes a $3.5 billion capital raising.

These funds will be used to acquire the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion.

What are analysts saying about ANZ's Suncorp Bank acquisition?

This morning the team at Goldman Sachs gave their verdict on the Suncorp Bank acquisition.

According to the release, the broker sees both positives and negatives from the acquisition.

The positives are the expectation that the deal will be earnings per share accretive post synergies and boost to its domestic retail/commercial banking. Goldman said:

Strategically, the proposed acquisition somewhat improves ANZ's relative lack of scale in domestic retail/commercial banking. Based on APRA's monthly ADI statistics, ANZ's market share should increase c.2% in home lending and c.3% in retail deposits.

Whereas the negatives are the elevated operational risks associated with the delivery of the aforementioned synergies and competition concerns. Goldman explained:

We see operational risk as elevated, given i) management's expected A$260 mn of pre-tax synergies largely rely on getting SUN's 1.2 mn customers on to its still yet to be completed ANZ Plus platform, and ii) potential competition concerns.

This synergy assumption looks high versus previous in-market financial transactions, which tend to see 25-30% of the target's cost base as synergies.

Is the ANZ share price good value?

The note reveals that Goldman Sachs has held firm with its neutral rating.

However, even after trimming its price target by 8% to $27.44, this still implies potential upside of 27% for investors over the next 12 months. That's not bad for a neutral rating!

In addition, it is worth noting that Goldman hasn't incorporated the Suncorp Bank acquisition into its estimates. This will happen once the deal completes and could give its valuation a boost when it does.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A man looking at his laptop and thinking.
Share Gainers

Thinking of selling your CBA shares? This expert says you should hold on

CBA shares are up by about 80% since November 2023.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Bank Shares

The catalysts that could bring CBA shares back to earth

CBA is now the world's most expensive banking stock.

Read more »

A money jar filled with coins, indicating an investment return from an ASX dividend share
Bank Shares

Is the CBA share price a buy for passive dividend income?

CBA is one of the biggest dividend payers in Australia. Is it a good buy?

Read more »

a woman looks exhausted and overwhelmed as she slumps forward into her hand while looking at her laptop screen.
Bank Shares

What Microsoft's lost decade could mean for CBA shares

Could CBA shares be worth the same in 10 years time?

Read more »

Woman calculating dividends on calculator and working on a laptop.
Bank Shares

When does Macquarie expect Westpac to cut its dividend?

Here's the latest forecast for this banking giant's dividend.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

When will CBA shares stop rising? CSL might give us a clue

CSL's history might tell us what's in store for CBA.

Read more »

Woman and man calculating a dividend yield.
Bank Shares

Is the ANZ share price a buy right now?

Should investors be attracted to the major bank?

Read more »

stockmarket graphic in background with man looking at stockmarket on phone
Bank Shares

Which of the big four bank shares have doubled in the last 5 years?

These two blue-chip bank shares have risen above the rest in recent times.

Read more »